Buying a foreclosure? You better check twice. . .

No one likes to talk, think or deal with foreclosures - except buyers. Buyers seem to like the idea of a bargain. A home becomes a foreclosure property when a property owner goes 3 months or longer without making a payment to the lender. At this time, the lender is legally allowed to proceed with reclaiming the property, also known as the "foreclosure process." Not all lenders start the process immediately, but they are permitted to do so by law. Once the property is reclaimed by the bank/lender, it is technically considered to be a "foreclosure." Yes, we even have foreclosures in Central Pennsylvania.

There are the top 3 things a buyer should know about buying a foreclosed home.

1. The owner is a bank, and while there is staff available to talk to (sometimes) you are not dealing wiht emotion - it is purely a business tranaction. You cannot tell a bank what to do, they will do what they want to do. Banks DO NOT care about your personally.

2. There will more paperwork that with a typical sale. Often they have their own contracts and procedures.

3. The bank will not complete a Seller Disclosure, they know nothing about the house and again don't care. The house is being sold "as is" and you can do inspections, but you can't negotiate repairs, they are your total responsibility OR you can back away. . .typically you can't negotiate.

Joy, so right! I hear buyers say things like, "Here is what we want the bank to do" or "We are going to lowball this foreclosure."

Right. That is planning for failure - we have a bargain shortage around here and banks know it! Banks don't listen and they don't care - it's all about the numbers, and that is all that matters in their world. They don't care about your timing, your school start dates, your job, etc. You had better hurry when they tell you to even though they made you wait for weeks (or months) or you are not going to get the house.

And you had better do your due diligence, lots of baggage and hidden work with these. Not for the faint of heart!!

Only recently have we started to work with two local small banks that have been giving us their "high end" REO's and thankfully we have not had to deal with much abuse. We have been able to convince the bank to get "pre-inspections" so they know what to expect. Because they are local banks they don't want to have the buyer bad mouth them after the sale.

Thanks Doug - I saw that John in San Fran also said he was familiar with REO's - glad to be in Central PA. :)

That is what we are seeing too Richard. . . a little pain for a better deal. Too bad real estate agents experience a little more pain too, but get nothing else out of it - except a satisfied client of course. ;)

Thanks Gita!

I agree with you 100% Myrl. I think that buyers should NOT get hooked up with thinking they are getting a huge bargain just because it's a foreclosure, there are other great homes out there that may be a better "deal" that aren't foreclosures or short sales.

Joy: Until they've gone through the process, I believe many buyers considering foreclosure purchases simply do not comprehend the level of "don't care" or lack of emotion that they will encounter from the banks. I liken it to a first-time mother not knowing what lies ahead in childbirth. Until she's been through it, she just can't fathom the full experience either ...

You're right. Your first comment "1. The owner is a bank, and while there is staff available to talk to (sometimes) you are not dealing with emotion - it is purely a business transaction. You cannot tell a bank what to do, they will do what they want to do. Banks DO NOT care about you personally.

I like your analogy Gene, sounds like experience talking!
Great point Chris, I am going to add this to my repertoire.
I agree Jon. Home buying is such an emotional decision for buyers and such a non emotional one for the banks, it's hard for buyers to not feel threatened. Sounds like Robert has experienced this too!

Joy it is interesting how true your post is. I have sold quite a few foreclosures to buyers in the past three years and I only represented seasoned investors. They understand that the Bank "knows nothing" and "buyer beware....do your own investigation" and if you did not do a good enough job, "the bank" is protected by an umbrella of Disclosures that they are not responsible for anything!

I do a lot of forclosures with my buyers and all of your points are accurate. The hardest part is finding a forclosure for the average buyer that will pass an appraisers review, but can be great transactions when they do.

Very good post. I loved reading the comments your post generated. Thanks for highlighting important info that buyers needs to know (and agents who may not be familiar with REO's) when considering a foreclosure purchase.

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